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Why Is GM No Longer Reporting Vehicle Production Data?

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When General Motors stopped providing its monthly vehicle production data last month, some stakeholders were highly discontent about the decision. Used as a key forecasting tool for analysts and parts suppliers, the move is fueled by GM’s desire to communicate a more accurate overview of the company’s profitability to Wall Street, said GM Chief Financial Officer Dan Ammann.

Initially announced during GM’s Q1 earnings call in May, the change will also provide the automaker with a more accurate picture of an individual vehicle’s profitability, according to GM Chairman and CEO Dan Akerson.

Historically, profit from the sale of a GM vehicle could have been partially recorded in the market where it was built, in the country where it was sold, and in the region where it was sold. Going forward, all earnings from a vehicle sale, plus the cost associated with its manufacturing, will be reorder in the country where it is sold. The change will assist GM executives make better and more informed decisions, according to Mr. Ammann.

“The main driver of profitability in any given market is going to be how many vehicles we sell there, not how many we produce,” said Mr. Ammann. “Historically, profitability was tied more directly to production, where something was produced; now it’s tied to where it is sold.”

“This gives us much greater visibility on where we’re making money and where we’re not,” Ammann says, adding that regional and country executives now “understand the total corporate profitability associated with that vehicle and can make the right price-volume trade-off in the marketplace.

The move is “a huge step forward” for GM in terms of managing the company, added Mr. Akerson.

Competitive forces also played a role in the decision, according to Mr. Ammann.

“We face a trade-off between providing information that is clearly tied between (vehicle) volume results and our financial results, and not disclosing every conceivable fact and figure that we have,” Ammann said.

But stakeholders, including analysts and parts suppliers, who rely on the data to forecast future production, have critiqued the move. Analysts, who determine an automaker’s ability to match supply with demand, state that they will no longer have data to forecast future vehicle output, while parts suppliers say that they rely on the numbers to keep their output volume in line with those of their customers. In place of the production figures, GM will post wholesale deliveries to dealerships as a way to gauge volumes.

Some constituents are planning to lobby GM in an effort to reverse its decision.

“Externally, it is not a big deal, but internally it’s a good example of how a finance perspective can give people a much better tool, much better visibility and transparency on total company profitability associated with a given car in a given market”, said Ammann.

Notably, The General’s move breaks a decades-long industry practice, as the data will not be released during GM’s monthly sales nor quarterly or annual financial reports. There are also fears that other automakers will follow in GM’s footsteps. The automaker will, however, continue providing the data to the U.S. government, as federal agencies use the data to compile reports of various key economic indicators, such as gross domestic product.

The GM Authority Take

GM’s reasoning in this matter makes complete sense: production numbers may have been relevant in the past, but sales are what matter today. Plus, the new method of accounting for vehicle sales on a global level is significantly less complex and provides for greater accountability by market.

When it comes to those who are in need of the production data but will no longer have access to it (analysts and suppliers), there are several elements that need to be taken into consideration. The distress from analysts is understandable, and it looks like they’ll need to find another way to get the data (perhaps by partnering with the U.S. Government). Suppliers, on the other hand, have an indirect but consequential stake in GM’s business; in that regard, they need to find a way to work with GM to exchange the data in question privately. Perhaps that’s a grand oversimplification… but if suppliers can make a solid case to get, for instance, a private data feed from GM (that they won’t share/leak publicly), then we don’t see a reason for GM not to oblige.

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19 Comments

True Production numbers do not reflect profits and can hurt investment in stock.

I also have issue with the monthly sales reporting that the media uses. Too often you see a 20% gain by Chrysler or one of the other brands and while it is a gain the fact is they improved on selling almost no cars the month before. Too often you see GM only have a 3% gain but they also sold a record number of cars the month before so that three percent is really a good number.

The bottom line is how much money you spent and how much you brought in and what your projected earnings will be. This is what drives stock prices that GM need to gain on and retain. Too often many will spin the numbers to help or hurt a company in the media.

I am sure GM has ways to work with the suppliers to help them know what the future needs will be in other ways.

Seriously? It states right there in the GM Authority take that “GM’s reasoning in this matter makes complete sense” — completely agreeing with your statement that reads, “Gm you run your business the way you see if and if they don’t like it tough”.

“provide the automaker with a more accurate picture of an individual vehicle’s profitability” by withholding the information from the general public? Not publishing production statistics is ““a huge step forward” for GM in terms of managing the company”?

GM simply doesn’t want to report the information. It has nothing to do with profitability. Profit is driven by servicing the car post-sale. Seventy percent of profit comes from aftersales. If GM were more focused on how it takes care of the customer AFTER selling the car it would have a better understanding of how to make MORE money doing so. The only vehicles larded with any kind of SALES profit are trucks and SUVs. GM needs to improve its systems for capturing aftersales revenue and profit. Not reporting production simply reflects a desire to be more opaque.

Believe what you want to believe. They simply don’t want to share any information they don’t have to share. Aftersales is a massively profitable business for GM. Accounting for profitability per-car is a fool’s errand. They aren’t making nearly as much money selling cars as they are taking care of cars – after all, they last 11+ years! Accident aftercare, alone, is a $40B business in North America.

Used to work there and know exactly how much we used to make on individual vehicle sales.

Vehicles have at least 3 year warranties. Any money made under warranty goes to the dealers. GM does not make any money until the vehicle is out of warranty. And yes they make decent money on the parts sales (dealers get the hourly profit and percentage of parts profit) but nowhere near 70% of GM total profit.

Look, if what you say is true then GM is simply underperforming the industry. I am saying that 70% of total corp. profit comes from aftersales – or ought to – that is industry average. Per-car calculations are meaningless – those figures can be manipulated and twisted any way GM wants to twist them. They don’t make THAT much money selling cars – except trucks and SUVs. Aftersales is the profitable portion of the business.

Perhaps Toyota and VW make 70% of their profit from dealer parts sales after the warranty runs out. I really doubt it but I have nothing except my knowledge of the industry saying that is crazy. Someone, somewhere would have stated this on the internet.

Just back it up with something. Anything. Any comment from an automotive executive from any company. Give us something to look at.

I did find this statement (2010, when sales were down and OEM’s were looking for profit anywhere) from a consulting firm trying to get business from the OEM’s to improve parts sales.

“OEM challenges in aftersales
The challenges are numerous. Transforming a global or regional service parts business or enhancing services to increase dealer and customer loyalty are complex endeavors. Major changes to existing organizations, processes and technology often are required to achieve the desired results. The parts business may account for only 10 to 15 percent of sales, but it typically averages 25 to 50 percent of profits.”

So maybe some OEM’s are getting 30%, not 70% which is somewhat more believable. But again this is just one opinion from a consulting firm.

Since this is the information age and we should all be trying to follow the money for any decision made these days…one should assume that production forecast data is worth money to suppliers. Production Purchasing is always squeezing suppliers for more savings. What if…just what if the information is only “sold” to suppliers who maintain “green” status?